Does Globalisation Mean the End of the Welfare State?

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Does globalisation mean the end of the welfare state?

Despite the broad consensus that welfare states everywhere are in trouble, there has been limited progress in untangling the factors that might be generating the difficulty. Or specifying the processes through which these factors exert pressures on national welfare states. Globalisation has been seen by many as one of the key factors that has attributed to the decline of the welfare state. However other factors need to be taken into account when looking at this idea of the end of the welfare state. Growing service sectors decrease economic rate, the aging populations, changing family patterns, increasing share of women in the labour force, and the issue of the almost permanent issues of austerity Such post-industrial changes generate intense and persistent pressures on government budgets (Pierson 2001) which all guide governments to attempt cuts in social expenditures.

One of the key reason why globalisation is seen as a threat to the welfare state is the idea that globalisation triggers a race to the bottom, in which workers are just seen as a commodity, citizens have less social security, and capital dominates the state (Mishra 1999). Due to the increasing stress of international competition in trade markets as well as the increased mobility of capital and multi-national corporations, states are incentivized to cut labour costs, to reduce the price of goods and services, cut taxation to make their domestic markets more competitive, and to decrease the size and breadth of the welfare state (Cable 1995; Huber and Stephens 2001a:227). Globalisation gives finance capital and capital investors increased mobility which reduces the bargaining power of governments which are then forced to adopt business friendly policies that are increasingly resistant to welfare spending. (Evans 1997:66; Milner and Keohane 1996). This capital mobility in unregulated global markets diminishes the capacity of states to intervene in their own economies subsequently; other states are forced to do the same, which result in retrenchment of welfare. In the UK alone, sever cut backs to the welfare state have been made steadily since the 1980s. These cut backs occurred under both Conservative and Labour governments, because of a neo-liberal ideology shaped by the forces of economic globalisation. This asserts the primacy of the market over everything else. With the 2008 global financial crisis, austerity measures have become the norm. Cuts in public sector employment, reductions in public sector workers’ pensions, and the removal of Sure Start Centre’s are just a few elements of the welfare state which have been rolled back since 2010 alone. However without this increased economic integration and dependency, without the opening of capital markets, without competition for employment and specialization it is unlikely that states would be forced to choose between economic growth and social welfare provision. In an era of new economic, social and political challenges, when welfare services and support needs to expand to meet need and demand, globalisation is limiting the range of policy options available to states, limiting state sovereignty, entailing a retrenchment of the welfare state in developed nations. If the state no-longer has the capacity to provide the economic and social rights its citizens demand, the question is, what or who will?

Another factor which is putting pressure on welfare states is the aging population. Obviously people are living longer, retiring earlier, and needing more medical care are a growing proportion of all OECD economies' population. The aging of population reduces state capacity and increases political instability. Older people have stagnant or dwindling incomes, reducing the available tax basis for governments. Hence having a higher number of people over 64 can have adverse effects on how much the government can offer to its citizens, while the burden of...
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